How to draw up a budget
Last updated on 13th December, 2017 at 10:18 am
Ask yourself: do you know exactly how much money you spend each month on petrol, food, clothing and a bond/rental? The answer is more than likely a guess – and one that’s wide off the mark. The only way to know for sure is to budget.
A budget sounds like a daunting prospect. It’s what governments do every year for the nation in terms of allocating money for the health sector, transport, education, energy and defense, against monies coming in from exports and taxes. But basically it is simple housekeeping. The object of the exercise is to balance the books and live within the country’s means and to not spend that much over the monies the country makes. It is the same with a household budget or your personal budget. A budget is just a comparison – and an adjustment – of two lists. One list (a) is all the monies that come in every month; this can be salaries, bonuses, freelance work and any sales of discarded things on OLX or Gumtree. The second list (b) contains all your outgoing expenses – food, housing, medical, travel, clothing and entertainment etc. In other words, the things that you need to live and enjoy yourself.
Create your two lists (money in and money out) and write the monthly values against each item. Next you add up list a and add up list b, and compare the two. Do this neatly on a sheet of paper or an Excel spreadsheet. You will either have a DEFICIT – you will be spending more than you earn, or you will – hopefully – have a SURPLUS, when you will be earning more than you spend.
The benefits of a budget
Just do this as a simple exercise to start with to find out where you stand. You will be surprised. Hopefully pleasantly, but when you go through all your slips and bank accounts you will realise how much you are spending and how much you can save and cut back in certain areas. Maybe you are spending too much on the car or a scooter, or throwing away money on your four-cappuccinos-a-day habit at the coffee shop. There are plenty of ways you could trim at least R500 to R1 000 a month (or more) from your spending if you are careful and examine your money habits. And that’s a saving of between R6 000 and R12 000 a year – which is perhaps the price of a holiday in Mauritius or a deposit on a vehicle or the start of an education savings fund. Well worth it.
By Paul Kerton
Want to learn more?
We send out regular emails packed with useful advice, ideas and tips on everything from saving and investing to budgeting and tax. If you're a Sanlam Reality member and not receiving these emails, update your contact details now.Update Now